what is an RMD?

What is an RMD?

RMD stands for Required Minimum Distribution, and is the source of many of the questions we get from clients at FSA.  In her #TechnicalTuesday debut, Kim Scott, CFP®, explains what a Required Minimum Distribution is, and how it could apply to you.


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Welcome to Technical Tuesdays from Financial Services Advisory, where we take just a couple minutes to talk about a financial planning concept. My name is Kim Scott, and I’ll be your host today.

Today’s question is “What is an RMD?”

RMD stands for required minimum distribution. This is when you’re required to start taking money out of your retirement accounts and your IRAs. This starts when you reach the age 70 1/2.

Now in the year that you reach age 70 ½ you actually have a little bit of flexibility. You can push your first distribution into the next year if you’d like. The only caveat to that is now you have to take two that following year.

For example, let’s say I turned 70 ½ this year.  I know I look pretty good for my age. If I did, I actually could take my 2018 distribution this year or I could push it until early next year – up until April 1st of 2019. Now if I did wait until 2019, then I’d have to take two distributions. I’d have to take the one for 2018 and the one for 2019 both in that year. So that can make sense sometimes but it sometimes it can be tricky tax-wise. So it’s something to keep in mind and talk to your CPA about.

The RMD is calculated based on your account value and your life expectancy. It generally starts

around 3% when you reach age 70 ½ and it increases from there. Now one thing to note is that you don’t have a Required Minimum Distribution if you had a Roth IRA. So if you personally have contributed to a Roth IRA, you don’t ever have to pull that money out during your lifetime.

Another thing to note is that there are other times when you may have a Required Minimum Distribution, being under the age of 70 1/2. And this is if you’ve inherited an IRA or Roth IRA. In both instances you do have a Required Minimum Distribution. Now the amount may be smaller because it’s still based on your life expectancy, so generally that’s longer if you’re younger, but you do still have to pull – and that’s an IRA and a Roth IRA.

Feel free to give us a call or shoot us an email if you have any additional questions. For now, I’m Kim Scott, and this has been Technical Tuesday!

For FSA’s disclosures, including our Disclosure Brochure, please visit FSAinvest.com/disclosures.

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